Why buy bullion

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Table of Contents. Investing in Gold. Prices of Gold. When Should You Buy Gold? By Ken Little Full Bio LinkedIn Twitter Ken Little has more than two decades of experience writing about personal finance, investing, the stock market, and general business topics.

He has written and published 15 books specifically about investing and the stock market, many of which are part of the well-known franchise, The Complete Idiot's Guides. As a freelance writer and consultant, Ken focuses on stocks , trading basics, investment strategy, and health care. Learn about our editorial policies.

Since the U. But since the U. Gold and silver bullion is one of the few investments that offer a refuge from any potential devaluation in the U. In fact, the price of gold and the U.

Subscribe to our newsletter to receive exclusive discounts and industry news. Show Charts. Hide Charts. In comparison, it could take 20 years to pay the equivalent costs in management fees. A key reason to own precious metals is to hedge against risk, so storing metal with a risky counterparty should be avoided.

Many reputable storage providers offer insured storage. As demonstrated in , even the largest financial institutions are exposed in a market calamity. In certain situations, bullion banks are also permitted to use sub-custodians for storage which introduces another layer of unquantifiable risk.

Mitigate counterparty risk by selecting trustworthy and reputable storage facilities. For ETFs and closed-end funds, avoid storage custodians which are subsidiaries of levered financial institutions. Direct investment in coins and bars is the easiest way to take physical delivery but there are trade-offs, such as mark-ups and the cumbersome nature of traveling to a dealer and then choosing the resting place for the metal, such as a safety deposit box.

Most prominent bullion ETFs do not permit the average investor to take physical delivery of the underlying metal — this flexibility is reserved only for a limited number of Authorized Participants mostly bullion banks selected by the ETF to support creation of new units. Some closed-end funds allow investors to take physical delivery of the underlying metal.

The option and ability for investors to take physical delivery of the underlying precious metal is an important feature of any bullion investment vehicle. Choose accordingly. There are attendant costs to physical ownership of bars and coins, including insurance and storage. ETFs and closed-end funds charge annual management fees to cover costs and provide a profit to the management company. For ETFs and closed-end funds, compare the management fees across different offerings, but also consider the differences in features and the associated risks with each offering to determine the overall value you receive.

While many investors intend to invest in precious metals for the long term, there is always the possibility that a change in circumstances requires short-term liquidation. Selling coins and bars can be a cumbersome process. ETFs and closed- end funds, on the other hand, trade on an exchange such as the New York and Toronto Stock Exchanges and can be bought and sold throughout the trading day.

For U. The tax rate on precious metals investments held for less than one year will always be the ordinary income rate for the taxpayer. ETFs holding precious metals are subject to the same tax treatment as ownership of precious metals coins or bars.

For some closed-end funds, special U. For non-corporate U. We no longer even have a passbook to hold on to.

We certainly never see most of our money as a tangible object. Some people may look askance to buy gold coins in this day and age, however. Gold and other hard metals have always been a time-honored part of traditional investment plans. If you decide to buy gold coins, get it from a reputable dealer or financial institution. You may pay a higher premium if you buy gold coins less than one ounce each. They can sell at a very high premium, and their prices are dependent on more factors. Once you have the coins, you may be tempted to run the coins through your hands, like Ebenezer Scrooge.